Luke Szkudlarek

First thoughts about Internet becoming Perfect Competition market appeared in 2000. Will the Internet Lead to Perfect Competition?. The article highlihgts two main barriers to the Perfect Competition market structure. These are price discrimination and marketing costs of market entry. With more advanced Web the remaining requirements are likely to be fulfilled and this includes atomicity (a large number of small producers and consumers on a given market), homogeneity (there is no product differentiation), perfect and complete information (All firms and consumers know the prices set by all firms), equal access to production technologies and individual buyers and sellers act independently.

Price discrimination exists when identical products are transacted at different prices from the same seller. In terms of Internet, it means that people who have more time to do research have more chances of finding a better deal, i.e. are able to buy a product or a service at lower price. The article also says that barriers to entry still exist as the marketing costs might be at very high level. This is mainly related to the fact that not every company can affort to spend money on Pay Per Click advertising or Search Engine Optimisation (SEO) services. This proves that both arguments are relevant in World Wide Web, however, they do not necessarily apply to the Semantic Web project.

The Tanya Gupta and Abir Qasem in their article “Reduction of price dispersion through Semantic E-commerce: A Position Paper” proves that information assymentry in Semanic Web won’t exist and the price discrimination will be highly reduced. How about barriers to entry? In today’s web, where most of the websites traffic comes from search engines, we can distinguish between organic/natural search results and paid search (Pay Per Click) results. However, even in the Semantic Web perfect information market there will be companies eager to pay to advertise new products or services. Would this advertising and marketing activities create any additional revenue? If all potential customers already have a full access to the information they need to make rational buying decision spending money on paid ads won’t be effective from economical point of view. However, if Semantic Web doesn’t offer real-time enviroment paid ads might still prove to be effective and profitable in short term.